Covid-19 hits Carlsberg Malaysia hard as revenue drops 23.1pc, net profit down 45.3pc in 1H 2020

Overall Group revenue dropped 23.1 per cent to RM877.1 million while Group net profit was down 45.3 per cent to RM83.6 million for 1HFY20 versus 1HFY19. — Picture from Carlsberg Brewery Malaysia Berhad
Overall Group revenue dropped 23.1 per cent to RM877.1 million while Group net profit was down 45.3 per cent to RM83.6 million for 1HFY20 versus 1HFY19. — Picture from Carlsberg Brewery Malaysia Berhad

SHAH ALAM, 14 Aug — Carlsberg Brewery Malaysia Berhad (the Group) reported a substantial decline in both revenue and net profit for the period ended June 30, 2020 (1HFY20) that were attributed primarily to the critical measures undertaken by the governments and peoples in Malaysia and Singapore to counter the Covid-19 pandemic.

Overall Group revenue dropped 23.1 per cent to RM877.1 million while Group net profit was down 45.3 per cent to RM83.6 million for 1HFY20 versus 1HFY19.  The adverse impact from the Covid-19 were partially mitigated by tighter cost controls under the Fund the Journey programme, one of the Group’s strategic priorities.

The weak results were severely impacted by production suspension and limitations to sales and distribution amid Covid-19. The Group’s production was suspended for seven weeks since the movement control order (MCO) began on March 18 in Malaysia. The pandemic had significantly affected sales and distribution during the conditional and recovery MCO in Malaysia and the circuit breaker (CB) in Singapore. In the financial period, the Group also recognised a one-off RM6.4 million settlement with the Royal Malaysian Customs (RMC) with regards to the bill of demand on excise duties issued by the Selangor State Director in 2014.

For the quarter ended June 30, 2020 (Q2FY20), the Group posted a lower revenue by 40.2 per cent to RM287.3 million mainly due to the significantly lower sales and the absence of consumer-facing promotions and activities to drive consumption during the partial lockdowns in both Malaysia and Singapore. In Malaysia, brewery operations were suspended until May 3; sales resumed slowly in May.

In the quarter under review, the Group’s net profit declined by 83.7 per cent to RM10.6 million, as a result of lower sales in both markets, the RM6.4 million settlement with RMC in Malaysia and a reduced share of profits by RM4.2 million from its associate company, Lion Brewery (Ceylon) PLC (LBCP) due to lockdown restrictions imposed by the Sri Lankan government. After adjusting for the RMC settlement, the Group’s net profit fell 76.3 per cent to RM15.5 million for Q2FY20 vs Q2FY19.

In Malaysia, revenue for 1HFY20 declined by 22.4 per cent to RM653.4 million and profit from operations reduced by 42.4 per cent to RM86.2 million. On the comparable basis of Q2FY20 vs Q2FY19, revenue dropped 38.9 per cent to RM208.1 million and profit from operation slipped 79.6 per cent to RM12 million. Lower sales and the one-off RMC settlement were partially offset by lower sales, marketing and operating expenses.

Singapore revenue dropped by 25.0 per cent to RM223.7 million and profit from operations declined by 57.2 per cent to RM19.3 million for 1HFY20 as compared to the same period last year. For the quarter, revenue dropped by 43.5 per cent to RM79.2 million whilst profit from operations took a hit of 93.7 per cent to RM1.5 million for Q2FY20 against the same quarter last year.

Group earnings per share for the quarter was 3.48 sen, sharply lower by 83.7 per cent compared with 21.34 sen for the corresponding quarter last year.

The Group is focusing on cash flow and the optimisation of its trade working capital to ensure sufficient liquidity in the months ahead. Under such difficult circumstances, the Board decided to suspend the quarterly dividend payments for the financial year ending December 31, 2020 as a more prudent focus on preserving cash and liquidity, and with the intent to strike a balance between the long-term health of the Group and returns to shareholders.

Managing Director Stefano Clini commented, “The MCO and CB had an adverse impact on consumption, hence a weaker performance as reported. We anticipate business recovery to be slow over the next few months because of the persevering effects of Covid-19 and the measures necessary to control them. As a consequence, consumer sentiment will remain depressed, particularly in the on-trade sector due to reduced capacities and shorter operating hours, social distancing, health and safety restrictions, as well as various financial and operating challenges that many F&B businesses face in order to stay afloat.”

The Group also urges the Malaysian government not to impose any hike in excise duties at the upcoming National Budget 2021 announcement in November as further increases will cause a worsening influx of contraband products and loss of government tax revenue.

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